Updated Jan 10, 2023
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As the push to switch to renewable energy grows, thousands of homeowners are switching to solar power. Some states are more solar-friendly than others, as some offer excellent rebates, incentives, and credits. This guide covers specific solar incentives available to Minnesota homeowners and businesses, including:
As a whole, Minnesota is quite solar-friendly, as there are multiple state-level incentives available. When paired with federal incentives, the cost of a new solar energy system drops considerably.
Solar is becoming an increasingly popular addition to Minnesota homes. Although Minnesota receives fewer sunny days than the United States average, the price per watt is lower than average. The total cost is generally higher, however, since many homeowners need more panels to produce similar amounts of energy as states with abundant sunshine.
With this in mind, switching to solar in Minnesota is doable for many homeowners, as numerous rebates, incentive programs, and tax exemptions lower the steep upfront price of a solar energy system. On top of local incentives and rebates, homeowners can take advantage of the Federal Solar Tax Credit, which slices the final cost substantially.
Solar energy systems allow Minnesota homeowners to save on electric bills and earn credits for future utility bills due to the state’s exceptional net metering program.
Homeowners throughout the North Star State can expect to pay about $22,720 for a solar energy system before utilizing any incentives or rebates. Since Minnesota only receives around 195 days of sunshine annually, homeowners need to install additional panels to harness enough energy for their homes.
Due to this, costs for a solar energy system can be slightly higher than systems in sunny states, where fewer panels may be necessary to gather energy. Of course, pricing ranges based on numerous factors, including the size of your home, your home’s energy consumption, the solar panel brand, and your energy efficiency, among other factors.
However, Minnesota is a solar-friendly state, so homeowners have multiple rebates and incentives available to offset the overall cost of the system. Aside from local solar incentives, homeowners can also tack on the Federal Solar Tax Credit for additional savings after filing taxes.
Minnesota residents can save thousands to tens of thousands on new solar energy system installations. The savings come from utilizing the pool of rebates and incentives available to Minnesota homeowners, such as the state’s sales and property tax exemptions or the rebates offered through local power and utility companies.
Combined with the Federal Solar Tax Credit, homeowners in the North Star State could save themselves thousands of dollars.
|Federal Solar Tax Credit||The ITC credit can return up to 30% of the total system cost to Minnesota homeowners in their tax returns.||December 31st, 2032|
|Minnesota Sales Tax Exemption||Minnesota homeowners are exempt from paying sales tax on solar equipment, which can save about $1,500.||None|
|Minnesota Property Tax Exemption||Although solar energy systems increase the value of your home, Minnesota homeowners don’t face raised property taxes due to installing a solar energy system.||None|
|St. Louis Park Solar Sundown Program||This program targets low-income homeowners and can save up to 6% on the total cost of a solar energy system.||None|
|XCEL Energy Solar Rewards Program||Minnesota homeowners can receive payments from XCEL Energy at a rate of $0.07 per kilowatt-hour for their solar energy system’s overproduced energy for ten years.||None|
Before investing in a solar energy system, consider the available incentives and rebates. Some of these programs require small but critical steps to ensure you can take full advantage of the price cut and savings. Remember to follow the requirements exactly as instructed to reap the benefits.
The Federal Solar Investment Tax Credit, also known as the ITC, is available to homeowners in all 50 states, including Minnesota residents. The ITC offers a discount on your new solar energy system purchase via your next federal tax return.
There are specific stipulations of the federal tax credit (PPAs and solar leases don’t qualify), but eligible homeowners can receive 30% of the original system cost back.
Homeowners are still required to pay the upfront cost of their solar energy system, but when they file taxes, the 30% comes back to them as part of their tax return. While the initial cost can be steep, a portion of this will come back to the homeowner in their tax return.
A provision in the recently-passed Inflation Reduction Act provided for the extension of this through the end of 2032.
Sales tax can contribute a sizable chunk to the overall cost of a solar energy system. Residents in the state of Minnesota don’t have to worry about allocating extra funds for sales tax, as solar energy systems are exempt.
Considering the average cost of solar energy systems in Minnesota ($22,720) and the average sales tax rate (6.875%), many homeowners would have to pay about $1,562 extra in sales tax.
For the most part, improving an aspect of your home drives your property value, increasing property taxes. This can be a concern for homeowners considering solar, as it’s an extra expense.
However, Minnesota solar energy systems are exempt from property taxes. This means your new solar energy system will not increase your property taxes despite increasing your home’s value. Over the system’s lifespan, the lack of additional property tax can amount to thousands to tens of thousands of dollars in savings.
Many states offer net metering programs, some better than others. Net metering is a policy that allows homeowners to collect energy from the grid but use their excess energy production from their solar array to offset and reduce these costs.
In other words, if your solar system overproduces and you don’t need all of the energy it’s harnessing, you can send it to the grid. This energy is credited toward your energy bill based on the amount you send.
When your system underproduces, the grid accounts for the difference. If you have credits with the utility, they will offset your bill based on those credits. In some scenarios, your electric bill might be reduced to almost nothing, even though your system isn’t producing enough for your home.
Each utility company has slightly different terms for its net metering policy, which may vary from one to the next. For example, one provider might set the rate at how they buy back excess energy and how frequently you’re credited monthly, while another puts it on an annual basis.
In Minnesota, XCEL Energy offers one of the best net metering policies. The electric company rolls over “credits” for overproduced energy sent to the grid every month. If your system overproduces enough to drive the total to $25 or more, the company sends Minnesota property owners a check for the overproduction since the last payout.
Several programs are available to residents in specific cities throughout the state. For example, the Minneapolis Green Cost Share program offers incentives for each kilowatt-hour produced at a minimum of $0.20/kWh, providing you qualify.
Residents of St. Louis Park can take advantage of the Solar Sundown program, which can reduce overall installation costs by up to 6%. This program targets low-income homeowners and can save up to $1,363 (based on the average system cost).
Chaska residents can utilize the Chaska Solar Rebate program, which can slice up to $2,500 off the installation cost for qualified customers.
Aside from local rebates and incentives, certain power companies throughout the state offer incentives to switch to solar.
XCEL Energy offers an exceptional opportunity to reduce the long-term installation costs of solar energy systems. The Solar Rewards Program provides an annual cash incentive of $0.07 per kWh that your system overproduces. The program is available for a whopping ten years, so homeowners could potentially eliminate their electric bills and get paid by the provider (instead of the other way around).
Minnesota Power’s SolarSense program offers rebates for solar installation based on system size, total cost, and the number of residents applying for the program. In 2022, the maximum allocation of funds is over $175,000.
Customers of Dakota Electric Association can take advantage of a $500 solar commissioning rebate, available to all customers who install new solar equipment and put it into commission.
Owatonna Public Utilities offers a similar Conserve and Save program where customers can receive a $500 rebate. The program is first-come, first-serve, so rebates aren’t guaranteed.
Rochester Public Utilities offers solar electric rebates for new solar panel systems at least 2kW in size. The rebate is worth $500; most customers qualify since most systems are about 8kW.
Minnesota residents have access to numerous rebates and incentives, but so do businesses. In many scenarios, businesses can save thousands of dollars using available incentives, especially due to the demand for larger systems.
The Property Assessed Clean Energy (PACE) program is available to numerous entities in Minnesota, including commercial buildings, farms, nonprofit organizations, and investor-owned multi-family properties. The PACE program helps make solar loans more available and affordable, which helps drive the rate of solar conversions across the state. The program assists with acquiring solar energy systems, various HVAC systems, energy-efficient equipment, and much more.
The program is available through MinnPACE, and the state now allows PACE loans for commercial and nonprofit customers. However, the residential side of things is still in progress, so many residents are ineligible for this program.
Agricultural producers throughout the U.S. can take advantage of the Department of Agriculture’s Rural Energy for America Program (REAP). This program offers assistance during the switch to renewable energy, helping with loans for clean energy systems, including solar.
REAP resources aren’t limited to agricultural producers – many small businesses in rural areas can utilize this grant to install or upgrade renewable energy sources. Small businesses and farmers can continue focusing on their work after submitting their solar project plans, as the USDA handles applications on their behalf for available grants.
Minnesota businesses must provide their contact information to the USDA to begin the application process.
Minnesota homeowners aren’t the only ones who can benefit from the Federal Solar Tax Credit. Minnesota businesses can claim up to 30% of the cost of their solar energy systems in their taxes, which can amount to thousands of dollars in savings, as many businesses need larger systems. This commercial tax credit has also been extended through the end of 2032.
Solar energy systems no longer feature a massive financial hurdle that bars residents from pursuing renewable energy. Minnesota residents have access to multiple state-level rebates and incentives to slash the cost of their new solar energy system. Combined with the ITC, solar is becoming more financially viable for homeowners throughout the state.
As the years pass, solar may become more affordable. However, in the next few years, the ITC will drop before eventually expiring, so now is the time to take advantage of the lower costs and invest in a renewable energy system.
Yes, solar is worth it in Minnesota. Given the extensive list of rebates and incentives available through numerous power companies, Minnesota homeowners can drastically reduce the cost of their systems. On top of that, homeowners can take advantage of the Federal Solar Tax Credit, which accounts for 30% of the total expenditure on their next tax return.
Additionally, Minnesota solar energy systems are exempt from property and sales tax, so homeowners don’t need to worry about paying extra in these areas. Aside from this, a solar energy system increases the value of your home. So, considering the extensive benefits and the potential to wipe out your electric bill, solar is worth it in Minnesota.
Implementing solar panels can make a substantial difference in energy costs for your Minnesota home. The total amount you’ll save on your electric bill depends on how much you spend on electricity, the size of your system, and how much you can offset with solar.
Some homeowners can knock their electric bill down to nothing, and some even get paid for the extra energy their systems produce, as Minnesota has an excellent net metering process.
In Minnesota, the average cost of going solar is $22,720, or $2.84 per watt. Using the average system size required in Minnesota, which is 8 kilowatts, we can determine the average cost of solar energy systems.
These costs are before applying any available rebates and incentives, such as the Federal Solar Tax Credit, which can take a whopping $5,907 off the total cost.
No, you can’t get solar panels for free in Minnesota. Although some solar leasing companies make it seem that the panels are free, you’re essentially signing up for a solar lease or power purchase agreement (PPA), in which you’ll pay for the panels.
However, Minnesota offers many rebates and incentives, so the system’s total cost may be much lower than in other states.
Minnesota homeowners have numerous solar rebates and incentives at their disposal. For example, XCEL Energy offers a Solar Rewards Program with an annual cash incentive of $0.07 per kilowatt-hour that the system overproduces for ten years. The incentive is higher for low-income homeowners.
Minnesota Power offers its SolarSense program to all its customers, offering rebates for solar installations based on sizing, cost, and the number of residents applying for the program. As of 2022, the maximum allocation of funds is over $175,00, so the potential to save with this rebate is solid.
The Minneapolis Green Cost Share program is available to Minneapolis residents and offers an incentive minimum of $0.20 per kilowatt-hour produced, providing you qualify.
St. Louis Park Solar Sundown offers a rebate of up to 6% of the total system cost for low-income homeowners. The Chaska Solar Rebate Program provides rebates up to $2,500 for qualified customers.
The Dakota Electric Association offers its customers $500 solar commissioning rebates. Rochester Public Utilities offer solar electric rebates of $500 to customers who newly installed solar energy systems at least 2 kW or larger.
Owatonna Public Utilities offers its customers a $500 rebate via its Conserve and Save program, although this rebate is first come, first serve.
Last but not least, Minnesota homeowners can take advantage of the Federal Solar Tax Credit, which offers up to 26% of the system’s purchase price when the homeowner files their taxes.
Thousands of Minnesota homeowners have switched to solar panels, but the number continues to climb. There are enough solar panels throughout the state to power 222,578 homes, accounting for about 3.52% of the state’s electricity.
No, solar panels don’t increase property taxes on a Minnesota home. Solar energy systems in Minnesota fall under a property tax exemption, meaning a homeowner’s property taxes will not rise after installing a photovoltaic system.
In the state of Minnesota, homeowners who invest in solar energy systems can claim the 30% percent credit on their federal taxes. On top of that, Minnesota solar energy systems are exempt from sales tax, meaning they don’t have to pay sales tax on the system.
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